A$ Outperforms On Commodity Rebound

AUD/USD spent much of the post-Asia close on the front foot. We got to the 0.6850 level on a couple of occasions but couldn't breach higher. We currently track slightly lower at 0.6845.

• The currency led all-comers in the G10 FX space over the past 24 hours, up close to 0.9%, slightly shading the GBP bounce. AUD outperformed EUR, CHF and JPY.
• The rebound in commodities was in focus, with copper surging nearly 5%, while aggregate base metals rose 2.3%. Iron ore got to as high as $115.50/tonne before easing. This followed on from yesterday's record trade surplus data for May, which was boosted by commodity prices.
• Renewed optimism around China stimulus boosted commodities, after yesterday's announcement China was considering bringing forward local government bond issuance slated for 2023 to this year (1.5 trln in yuan terms or $220bn).
• Equity sentiment was also positive in US markets, with the VIX dipping sub 26, before closing just above this level. US equities have risen for 4 straight sessions, as Fed officials try to play down recession risks. AUD/JPY is back above 93.00, versus early lows from yesterday of below 92.00.
• US yields generally remained on the front foot, as hawkish Fed rhetoric continued. AU-US spreads remained depressed on a 2yr tenor, but have seen more stability on a 10yr basis this week.
• There is no Australian data today, but the Australian and China Foreign Ministers are scheduled to meet today on the sidelines of the G20 Foreign Ministers meeting in Bali. This would be the first meeting between the two ministers since September 2019.